We turn our attention in this lesson and in Unit 21 to the question of what actually constitutes performance of a contract. Parties, it turns out, often have very different opinions of what happens that should count as a breach where the other party could then legitimately claim damages. Now, let's explore that question in a moment. But before we get there, this is a good opportunity to stop and see where we are. overall in the course.
We started with this question, is there a contract? Underneath that question, we looked at issues of formation, which requires mutual assent, typically shown through an offer and acceptance process. We looked at consideration, which requires that there be some exchange of value on both sides for the formation of a contract, or else an exception to the consideration doctrine must exist, such as promissory estoppel.
We have also explored the various defenses to formation, where the contract might be either void or voidable, and these defenses include capacity, the statute of frauds, duress, fraud, misrepresentation, unconscionability, and of course, contracts whose enforcement is against public policy. Having done that, we most recently moved into the question, What are the terms of the contract? There we dealt with the parole evidence rule, canons of interpretation, which are the interpretive rules that courts will generally follow when construing a contract.
We also looked at issues of conditions and implied terms, which are special kinds of terms that are unstated, but that we read into a contract. Now we're going to turn to the crucial question for the moment. Have the parties performed their contract?
Once we deal with the points of performance and breach, our final major issue will be what remedy will exist for breach of the contract. But for now, let's think about this issue of performance before we turn to remedies. There are actually two major and very different standards that we could use.
One of the standards is known as the perfect tender rule. Those of you who know Disney movies may think of this as the Mary Poppins rule, because she was practically perfect in every way. The idea behind the perfect tender rule is that a party who contracts for something has the right to get exactly what it contracted for, and nothing less. That is one potential standard.
The risk, of course, of the perfect tender rule is that some very minor and unimportant breaches could unintentionally become problematic and get a party in trouble when there was actually something quite trivial going on. So the other side of this is the idea of substantial performance, where maybe something is good enough to qualify as performing the contract. Now consider the pictures here. Like the bridge where the two sides don't quite meet, the jersey where you might notice a discrepancy between the word and the number, or perhaps the spelling out in front of a school.
In fact, none of what happened in those pictures actually would constitute substantial performance, because that's what the receiving party would actually get here is really nothing. They wouldn't get the actual benefit of the bargain, so the bridge wouldn't go across. the water, for example. So let's look at a more mundane example that might help explain things. Here we have a double Whopper hamburger on the screen.
Suppose you walked into your local Burger King and ordered a double Whopper with no ketchup, please. And then what you get is what's in the photo delivered to you. If you're wondering what's there in the picture, let me provide you an arrow. Do you notice what that is? Well, that's ketchup, precisely what you ordered not to be on the burger.
While there is no question that that is not exactly what you ask for, has the burger restaurant substantially performed the contract, enough that you would be obligated to pay for the burger? Reasonable minds could differ on this point, and I often find that people of different backgrounds have different ideas based on their experiences with retailers or even as retailers. but you can see there's at least a plausible argument that you received most of what you bargained for. Now, that is a very simple example, and frankly, customer service due to market competition will frequently take care of those sort of issues. But on a larger scale, that's the difference between the perfect tender rule and the substantial performance doctrine.
So let's begin with an early case. in American law that deals with both possibilities, although the result, I think, here is somewhat closer to the perfect tender standard. And that is the case of Smith v. Brady out of New York in 1858. One of the specifications of this contract for building some houses was that there would be nailing joists in the frames that were to be 12 inches apart. Specifically measuring from center to center.
You can guess what the problem was. Here, the builder used joists that were further apart. than 12 inches. So we have, if you will, technically a breach of the contract, and that's what the court had to deal with when the buyer didn't want to pay the builder. Now look at the evidence that I hope you saw in the opinion that the court recounts.
The evidence being given tends to show that the houses were sufficiently strong, that the joists and beams were placed at distances customary in that neighborhood, and that the defendant really was not injured at all by this violation of the contract. The opinion so far, with the argument from the builder, shows that, look, it's good enough. It's not like there's some sort of weakening where the house is about to fall down, and in fact, it's very much like other houses in the neighborhood.
But the court went on to say that the defendant Beyer, quote, having chosen to require in the plain letter of the contract that there should be in each building a certain number of joists and beams placed at certain distances from each other, the plaintiff that's the builder in this case, had no right to substitute another plan for this part of the work, nor could he justify, look at this term, willful departure from the contract by the opinion of other builders or by any custom, whether local or general. So we're kind of talking about usage of trade there. So in other words, this contract called for joists to be 12 inches apart, and and not further apart.
There is no right for the builder to do otherwise, and the court did go on to note that this was a house, and everyone has a right to build his house, his cottage, or his store after such model and in such style as shall best accord with his notions of utility or be most agreeable to his fancy. So you could ask for a actual castle, somewhat like the house that we see in the picture. Thus, we could have flighty reasons that a party might want a specific way of building a building. If the owner, we're told, having regard to strength and durability, has contracted for walls of specified materials to be laid in a particular manner, then, ultimately, The builder has no right to substitute his own judgment or that of others.
The New York court concludes, to hold a different doctrine would be simply to make another contract and would be giving to parties an encouragement to violate their engagements, which the just policy of the law does not permit. Thus, the early case of Smith v. Brady seems on its facts to come down fairly strongly on the perfect tender standard. And so you want to focus on that language there at the bottom of your screen.
So an idea that will run through all of these cases is that the courts do not want to write a different contract for the parties than what they had agreed to. But, in your casebook materials, look at this follow-up question. Although there is by the court a reference to the plain letter of the contract, and that the plaintiff had no right to substitute another plan, which is like the perfect tender standard, some other language toward the end of the opinion described the law as holding the contractor to a substantial performance. And that, as we saw a few slides ago, is the looser performance standard. So the question is, could a lawyer or some advocate or a party use Smith versus Brady as support for both of the standards?
In fact, that would be very possible. One of the reasons that substantial performance would not work in Smith versus Brady is that this opinion places a lot of emphasis on the particular method of building and how it is a very personal matter involving building homes. And the fact that the court talks about substantial performance does leave open the possibility maybe there's some sort of deviation from performance that would not be important enough to qualify as a breach.
And the court also seems to be concerned about the fact that this was a willful breach. So, on the other hand, the court emphasizes the precise letter of the contract and seems very much to hold the contractor to it. What I want you to see here is that the language in Smith and its facts can be used to support perfect tender, but with just a little bit of stretching, it might allow for a party to advocate for a substantial performance test.
This is what lawyers do. with case precedent. They try to shape it and pick up on aspects of it that support one argument or another. So, if anybody tells you, well, that this is, it's obvious that this case stands for a certain proposition, be aware that it might not be nearly so obvious.
That brings us to the end of this lesson, Introducing Standards of Contract Performance. Our next lesson will explore the rise of the Substantial Performance Doctrine. with the famous contracts case of Jacob and Young's versus Kent.